Penang residential property market bull run

The residential property market in Penang is on the right track; it's a property market bull run!" says Michael Geh, director of Raine & Horne International Zaki + Partners.

According to Geh, the affordable housing sector will continue to flourish the rest of the year and in the first quarter of next year due to strong demand for condominiums and apartment-style housing on both the island and mainland. Prices of landed homes are expected to continue to be strong as well.

"The buzz now is that developers and contractors are sounding out that steel, concrete and oil prices are spiralling upwards, adding to the costs of construction and hence to the sale price," says Geh.

Presenting The Edge/Raine & Horne International Zaki + Partners Penang housing property monitor for the period between July to September this year, Geh observes that the Penang property sector has been receiving new up-market developments catering to both local and foreign buyers, as well as strong take-up rates for residential landed properties.

"The market is very active, with sales activities rising sharply and demand exceeding supply for all types of properties. Real estate prices are increasing in line with higher construction costs but the take-up rate is still high with speculators and investors flooding the market. This has pushed prices and rents up and they are increasing at an unpredictable rate," says Geh.

"All indicators such as rent and price, mortgage recordings and building permits are increasing," he adds.

Luxurious condos seem to be the trend in Penang, with an estimated 2,153 units of future supply of new super condos and high-end apartments launched during 2H2007. Take-up rates have been encouraging, recording average sales of 70% to 80% for selected projects.

"Developers are optimistic about Penang's market," says Geh. Strong take-up of existing launches has further prompted demand, which contributed to developers' optimism, he adds.

Benchmark prices
In 2H2007, Ideal Group's i-Regency condos in Bukit Gambier set a new benchmark in pricing at RM300 per sq ft onwards, slightly higher than a fully renovated unit in University Place by Ivory Property Group.

"Recorded sales for i-Regency were convincing and of the 253 units priced around RM300,000 and above, 95% were sold in 3Q2007," says Geh.

"The primary market has never been better, with scarcity of land and demand from the public. Developers are convinced of getting better profits from higher pricing.

Thus, there's a push for luxurious properties to be planted everywhere on the island instead of only in Gurney Drive, Tanjung Bungah and Batu Feringghi," he says.

Ivory Property's Birch Regency, the only housing development project in the inner city of Georgetown for decades, has been 90% sold since September and the value of the project has been appreciating.

"The 1,050 sq ft condo units were sold for around RM300,000 to RM350,000 and surprisingly, are now already going for RM400,000 in the secondary market before they were issued with a certificate of occupancy," says Geh.

Another example is IJM Properties Sdn Bhd's The Spring Condominium, located off Jelutong Expressway. The units, of between 925 and 1,281 sq ft, were priced from RM230,000 onwards even before their official launch in November.

"There was excellent response from the market for open registration. Based on research and experiences, we expect at least 40% appreciation in prices in the secondary market after the certificate of occupancy has been obtained," says Geh.

"Penang still expects more housing projects to come up in line with the Northern Corridor Economic Region's key targets of achieving a 96% increase of GDP growth per capita, 40% increase in employment rate, and zero household poverty," he adds.

Demand for high-end condos
While prices of typical apartments and condos have been stable, luxury and high-end ones continue to soar.

According to Geh, real estate agents are finding the secondary market for luxury units challenging. "They are changing hands at a very fast pace but there are limited units for sale," he says.

Geh notes there is a big speculators/investors market. These people buy and sell when the property is nearing completion. Although the market recorded a slight decrease in the volume of transactions during 3Q2007, investors and speculators remain optimistic and continue to expect higher prices.

Prime areas like Gurney Drive, Tanjung Bungah, Pulau Tikus and Batu Feringghi are also attracting many foreigners. Geh says many owners are holding back on sales, waiting for the right time and price.

Research by Raine & Horne Zaki + Partners show that these prime areas continue to be popular with foreigners, with prices on the uptrend. Recently, a standard unit in Bellisa Court at Pulau Tikus with a built-up of 1,420 sq ft was sold for around RM760,000 to a foreigner compared to its market value of RM500,000.

"Property prices in Tanjung Bungah and Batu Feringghi have improved around 3% and 7%, respectively, compared to the last quarter," says Geh.

Hunza Properties Bhd's Gurney Paragon, an integrated development comprising two blocks of high-end condos and a shopping mall with one million sq ft of retail space, is located along Gurney Drive and expected to further enhance property prices around the vicinity.

"Gurney Paragon is a quality residential development in the popular Gurney area; its selling price of over RM450 per sq ft sets a new benchmark in the area," says Geh.

Landed homes
While highrises are gaining popularity, Geh says demand for landed properties, especially terraced houses, remains strong. He cites an example of S P Setia's Setia Pearl Island project where a total of 291 units were sold out within a few days when the developer launched its 3-storey terraced homes in 1Q2007. The homes have built-ups ranging from 2,337 to 2,720 sq ft and are tagged between RM618,000 and RM736,800.

Refurbishing or rebuilding old houses is also a trend as more discerning Penangites look for a better quality lifestyle. Old and "unfriendly" designs are being torn down to make way for more modern ones. Geh says these people know the value of the land, especially those located in the inner city of Georgetown where land is scarce.

On capital appreciation, Geh says landed properties tend to appreciate faster than condos. From the data sampled, 1-storey terraced houses appreciated between 3.06% to 13.2% while 2-storey terraced houses appreciated between 1.7% to 7.5% compared to the corresponding quarter last year. Meanwhile, 2-storey prices of semi-detached houses went up between 2.9% to 6.8% while prices of 2-storey detached houses saw an increase of between 1.35% to 11.5% in a year.

Rentals for landed homes in all areas sampled increased or were stable quarter-on-quarter.

Moving forward, Geh expects the uptrend of the residential market in Penang to continue well into next year.

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